Home > Blog > The Study “Assessing the potential for crowdfunding and other forms of alternative finance (AF) to support research and innovation” has been released! Get the report

The Study “Assessing the potential for crowdfunding and other forms of alternative finance (AF) to support research and innovation” has been released! Get the report

Submitted by kjakimowicz on Sun, 2017-04-09 19:49.

The Study Consortium* is proud to announce the release of the Study “Assessing the potential for crowdfunding and other forms of alternative finance (AF) to support research and innovation” which was initiated by the European Commission’s Directorate-General for Research & Innovation (DG RTD).

Access to finance is one of the main challenges for European companies, in particular those that are smaller, younger and more innovative. The Study presents research on how crowdfunding and other forms of alternative finance could support research and innovation (R&I). It quantifies and qualifies the potential of alternative finance in Europe with regards to research and innovation, identifies key challenges influencing the development of AF, and AF for research and innovation in particular, and recommends actions to overcome those challenges and to exploit the opportunities of AF for R&I.

To do that, the Study team used a unique methodological approach developed by the Politecnico di Milano, based on the computerised content analysis of the project descriptions. In total, 10 platforms were analysed included 263,781 projects that were launched between 2009 to 2016 by fundraisers located in 161 countries and using six languages. Other methods included desk research, surveys, case studies and focus groups.

What is the potential of alternative finance for research and innovation in Europe?

The estimated aggregated value of AF investment in R&I in the EU was approximately EUR 755.1 million in 2015, which constitutes between 1/6 and 1/8 of the total value of the European alternative finance market. AF plays a significant role in funding European R&I, especially when compared to the Horizon 2020 budget of approximately EUR 10 billion annually. However, whilst considering the strong difference in size and growth rate of AF between Europe and the rest of the world it is clear that European innovators are not benefiting from AF to the same extent as their competitors from other regions of the world.

The development of AF is very unbalanced between Member States, and AF for R&I follows the same trend (81% of the volume is represented by the UK and 78.1% of the R&I projects are based in the UK). Moreover, AF for R&I remains mostly domestic (70% of the platforms indicated that the percentage of funding coming from a different country is less than 20%) and less than 10% of cross-border activity happens between EU countries.

Looking at the different types of R&I, it appears that AF is more suitable for:
1) Later stages of the innovation cycle, when the results are easier to anticipate and evaluate by the “crowd” (according to the study results, there are on average 3 times more innovation-oriented projects than research-oriented projects),
2) Innovation related to the improvement of life-conditions (energy, environment, food, health),
3) Less capital-intensive initiatives (e.g. not for nanotechnology and research in space).

Moreover, there is a clear distinction between funding models for research vs. innovation. Donation and rewards-based funding models are mostly suitable for basic research, whilst equity and in part lending and reward, are useful for later stages of the innovation cycle, closer to market. Finally, projects funded by equity and lending platforms are bigger than those funded by rewards and donation, thus innovation AF campaigns are bigger than those focused on research. R&I projects (regardless of the platform) raise, on average, more funds than other projects but have lower success rates.

Download the full Study here.
Find the accompanying annexes here.
The executive summary is available here.

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